The temporary relief measures introduced at the height of the coronavirus pandemic to facilitate electronic signing of documents and virtual AGMs have, unfortunately, now lapsed. Accordingly, when signing documents, the old ‘wet ink’ methods are now back in vogue and AGMs will need to be carefully planned. It is hoped that the measures will be re-introduced later this calendar year.
The Government’s recent attempt to pass the Treasury Laws Amendment (2021 Measures No.1) Bill 2021 (Bill) was hoped to extend the temporary measures for electronic signing of documents and virtual AGMs to 15 September 2021. However, due to delays in the senate approval and inquiry process, debate on the Bill has been adjourned to 3 August 2021. As a result, until the Bill is passed, the Corporations Act has reverted to its pre-COVID status.
Execution of company documents
Due to the lapse of the temporary measures, section 127 of the Corporations Act now applies as it did prior. This means that the execution of company documents by electronic means will no longer satisfy the requirements of section 127 of the Corporations Act, or attract the benefit of the statutory assumptions in section 129 of the Corporations Act.
Unfortunately, ASIC has not adopted a ‘no-action’ position in respect of the electronic execution of documents. This is because these measures are concerned with the capacity of companies to enter arrangements with third parties, rather than Corporations Act obligations administered and enforced by ASIC.
The Governance Institute of Australia, along with other key stakeholders, has released guidance which outlines alternative arrangements companies may undertake in respect of electronic document execution. Specifically, the guidance notes that:
- a ‘modified split execution’ method may be used for the purposes of signing documents (other than deeds) under section 127 of the Corporations Act (this occurs where one director signs a document using a wet-ink signature, and then scans and sends the document to another director or secretary to print out the document and sign via wet-ink signature)
- if a company intends on utilising the above method, it should ensure that a statement is included in the document to the effect that the first-signing director authorised the second-signing director to produce a copy of the document so that the copy of the first-signed document is taken to be signed by the first-signing director.
However, for strict compliance with section 127 of the Corporations Act, companies should revert back to executing documents with ‘wet-ink’ signatures on the same static document.
Virtual AGMs
The modifications made to the Corporations Act to facilitate virtual AGMs; and permitting notices of a meeting and any other information in relation to a meeting to be provided using technology, no longer apply.
Fortunately, ASIC has adopted a ‘no-action’ position in respect of virtual meetings and sending notices of meetings. ASIC’s ‘no-action’ position:
- supports the holding of meetings using appropriate technology;
- facilitates electronic notice of meetings including supplementary notices; and
- allows more public companies an additional 2 months to hold their AGMs.
However ASIC’s ‘no-action’ position is conditional on a range of factors and companies wishing to rely on them for:
- ensure the technology used to facilitate the meeting gives all members a reasonable opportunity to participate;
- conduct voting at the meeting by poll rather than a show of hands;
- ensure that each person entitled to vote has been given the opportunity to participate in the vote in real time; and
- ensure the notice of meeting contains adequate information about how members can participate in the meeting.
- notices of meetings should:
- ensure the notice given includes the contents of the notice or details of an online location where the contents of the notice can be accessed;
- give notice personally or by post if a shareholder has not nominated an electronic address; and
- provide supplementary instructions for on-line participation at least two business days before the meeting is held.
This ‘no-action’ position remains until the earlier of 31 October 2021 or the date that any measures are passed by the Parliament as initially envisaged.
Re-introduction of relief
The Government’s temporary relief measures foreshadowed that they may be made permanent, which was the hope of most legal practitioners. In particular, the measures for electronic signing were a positive step for facilitating commercial transactions in the modern context. It is hoped that the reforms will be made permanent later this calendar year and this has the support of both the Coalition and Labor.
How we can help
Please contact Rohan Harris, Andrew Parlour, Rory Maguire, Kate Littlewood or Jaqueline Wilson from our Corporate and Commercial team should you require further advice in relation to corporate advisory or governance matters.
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